The dong has been under notable pressure over the past week as global investors flock to the greenback on expectations of fiscal stimulus programs under the incoming U.S. administration.
But the State Bank of Vietnam said on Thursday that the recent weakening of the dong is “normal,” with no pressure on the demand for the U.S. dollar.
The Vietnamese dong fell to a five-month low against the dollar on Thursday, after more than 10 months of stability this year.
Local banks said the dollar has been strong recently on the global market. It touched a 13-year high on Wednesday, fueled by widespread expectations of an infrastructure spending plan under the incoming presidential administration which makes the dollar more attractive to global investors.
The central bank confirmed that exchange rate adjustments made by commercial lenders are in line with changes in the official mid-point rate set by the central bank itself.
Businesses in Vietnam usually need more dollars for payments around this time of year. But the central bank said supply is not a concern, due to strong inflows of foreign direct investment, foreign capital through mergers and acquisitions, and overseas remittances in the last two months of the year.
In terms of demand, the central bank said it will allow commercial banks to keep offering short-term loans in foreign currencies until the end of 2017, despite recent lending restrictions. This policy could help traders.
The central bank, which does not regularly report on forex reserves, said last month that the total had reached a record high of $40 billion, equivalent to three months of imports.
The dong dropped further on Friday at major banks. Vietcombank quoted the selling price for the U.S. dollar at VND22,465 and the buying price at VND22,395, up VND50 from Thursday.
The official dong/dollar mid-point rate was VND22,112 per dollar, compared to VND22,101 on Thursday. The central bank allows dong/dollar transactions to move 3 percent on either side of this fixed mid-point.